ABSTRACT
This chapter discusses some possible implications for inflation-and hence for monetary policy—of some current developments on the supply side, in particular the ongoing revolution in information and communications technology. The best that monetary policy can do for the real economy is to secure and maintain actual and expected price stability. To come from the Bank of England to speak to the Society of Business Economists is to be a nominal economist among real economists. The Bank's paramount monetary policy objective of price stability, on the other hand, concerns a nominal variable—the general price level or, inversely, the purchasing power of money. The job for monetary policy would be to set the nominal interest rate equal to the natural rate of interest plus the inflation target. Although monetary quantities are valuable indicator variables, monetary policy in practice involves choosing the price of money with the explicit aim in the UK of achieving the inflation target.
